The ad platform marketplace of the future
With increasing demand for access to scale set to drive consolidation in the world of automated trading, Aidan Neill looks at which platforms will likely dominate and why
New ideas and technologies have the power to completely change the way industries operate. However, the change normally takes a significant amount of time, and despite how it’s often portrayed it does not happen overnight.
A standout example of this is a platform called SABRE which re-invented how airline seats were sold in the early 1960s. Set up by IBM and American Airlines, it moved seat reservations from paper based “Lazy Susans” (large circular turntables) to a database that provided instant access to seat inventory and passenger information.
This enabled American Airlines to price and sell seats in real-time, massively decreasing inventory wastage, booking errors, and allowing for the first steps towards true yield management. Due to the functionality offered by SABRE, the system itself became more valuable than the airline that created it.
In today’s world of self-service online reservations SABRE still leads the way and is used to book flights on hundreds of airlines.
How does this link with the world of media trading? It’s simple: ad platforms are competing to be the SABRE of the advertising industry by bringing the same levels of efficiency, scale and data to this sector.
The aim of this is that over time this automation will deliver better outcomes for both sides of the market (advertiser and media owner), and, as we have seen in the travel industry, there will an evolution of legacy business models. New entrants will enter the market, some mistakes will be made, but ultimately business processes will change either through evolution or discontinuation.
In recent years there’s been a large proliferation in the number of automated ad trading or ‘programmatic’ platforms servicing different media disciplines. The issue is that there are too many of these ‘me too’ venture capital-backed tech businesses, who in a number of instances are adding no real value and are fighting for their right to exist.
The majority won’t deliver the value to achieve the scale required to win the race – which is more of a marathon than a sprint. In most markets the infrastructure winners are typically limited to a select few. In the travel world, Worldspan and Amadeus are the only scale competitors to SABRE.
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I anticipate that over the next ten years we will see a similar consolidation in the media trading sector with a handful of automated ad platforms dominating.
The small number of winners will be those platforms which will deliver a much more meritocratic media marketplace where money flows to the most deserving places, rather than where protectionism instructs it to go – bringing much more efficiency and fluidity to the sector.
These platforms will offer media owners access to the widest possible buyers, limiting transaction costs and enhancing yields, and for buyers, a single access point to access a vast scale of media, incorporating key first and third party data with real-time dynamic pricing, as well as transparency and accountability.
Technology holds the promise to solve the allocation of capital across media in the way that it has done for financial services, making markets more efficient and fostering growth by better allocation of capital – in this case marketing budgets. Not everyone will benefit, but market efficiency will win out over time – it generally does.
How will consolidation happen?
To be a valuable part of the consolidation process scale is critical, and if you are not a large-scale business you had better be doing something that no other company is capable of, which is rare.
Everything else will gradually be competed out of existence. Local scale or category scale will be OK for a time; for example, Bitposter has set out to be the dominant infrastructure provider for the outdoor media market.
Whatever happens, consolidation will not happen quickly. Over the coming years there will be a considerable number of mergers, acquisitions, company failures and new contenders, as the evolution towards consolidation within the ad trading platform marketplace takes shape.
There are a growing list of contenders in this race, all with market valuations that are multiples of those of the major media holding companies – organisations from Oracle to Facebook and Amazon to SAP are all engaged either centrally or peripherally.
Recently, Accenture, a consulting firm with over 300,000 global employees and a valuation four times that of WPP, has made some moves – such as buying Karmarama in the UK. Their day-to-day existence involves CRM implementations within the world’s largest brands.
This gives them access to a significant amount of valuable first party consumer data from around the world, from which real time insight can be gleaned and applied to advertising spend on behalf of the same customers.
To compete against the major holding companies all they need to do is incorporate this data into a scale ad trading platform that they could create via acquiring or integrating the right component technologies across media channels. This is precisely what is in their sights.
It’s too early to say who will dominate and win the race to be the SABRE of the ad trading platform world. The early stand out candidates are Google, Facebook and Amazon, but they are not uniquely positioned across the wider advertising ecosystem.
Those who are most likely to win will be those who can deliver right time decisioning of consumer data and have access to inventory on a global scale, powered by open, transparent and meritocratic platforms that drive efficiency and real return on investment.
The component parts to do this exist but are currently fragmented. That will change and the big players have established the early battle lines. For many years, media buying was shielded by a combination of purchasing power, opacity and information asymmetry.
Automated media trading means legacy models are being challenged, as technology platforms can deliver better outcomes for buyers and sellers, increasingly at global scale. Change will not be good for all, but technology is like water – it inevitably always finds a way in.
Aidan Neill is CEO and co-founder of Bitposter